Nasdaq has put forward a proposal that would significantly tighten its approach to companies falling out of compliance with listing standards. The proposal is still in the public comment phase with a statutory decision deadline in December, although that timeline could shift due to the ongoing government shutdown. Should it eventually be adopted as written, the biggest shift would not simply in the rules themselves but in the removal of procedural safeguards that currently give companies time to cure deficiencies.

This proposal leaves certain non-compliant companies with virtually no grace period, increasing the likelihood of immediate suspension from Nasdaq trading and transfer to the over-the-counter (OTC) market while appeals are pending.

A new standard for immediate suspension

A company would face immediate suspension and delisting if:

• It is out of compliance with a numeric listing requirement, such as bid price, market value of public float, stockholders’ equity, net income, or total assets/revenue, and
• If its Market Value of Publicly Held Shares (MVPHS) has fallen below $5 million for ten consecutive trading days.

Appeals ordinarily stay a delisting and a Hearings Panel may grant up to 180 days to regain compliance. Under this new proposal, the stay would not apply when both prongs are met. By tying the immediate suspension trigger to both a specific numeric deficiency and a sustained MVPHS shortfall, companies facing significant market-value deterioration would no longer benefit from an extended cure process.

Proposed rule modifications

Several technical rule changes have been proposed. First, Nasdaq has proposed amending Listing Rule 5810(c)(2)(A)(i) to bar companies from submitting a compliance plan if their MVPHS has remained below $5 million for ten consecutive business days. In parallel, Listing Rule 5810(c)(3) would be modified to make clear that no compliance or cure period will be available in these circumstances.

Equally consequential is the proposed amendment to Rule 5815, which would remove the current stay provision specifically in this instance; ordinary cure periods still apply in other cases. Currently, a company appealing a delisting determination can often remain listed on Nasdaq until the Hearings Panel renders its decision. Under the proposed rule, that protection would be eliminated. The company’s securities would be suspended from Nasdaq during the pendency of the appeal, with trading relegated to the OTC market.

Although appeals would remain available, the loss of the stay invites immediate market disruption. For many companies, the reputational and liquidity consequences of OTC trading, even temporarily, may be as damaging as delisting itself.

Effective timing

As of November 2025, the proposal remains pending, but the SEC’s statutory decision deadline is December 18, 2025. If the SEC approves the proposal, the new rules would apply to fresh non-compliance notices beginning 60 days after approval. This timeline underscores how quickly the landscape could shift. Companies currently hovering near critical thresholds could begin receiving suspension notices within two months of regulatory sign-off.

Why this matters for issuers

For decades, Nasdaq has balanced enforcement of listing standards with opportunities for companies to cure deficiencies. By curtailing cure periods and eliminating the stay pending appeal, Nasdaq is moving toward a regime of immediate enforcement in situations where market value has eroded below a floor it considers untenable.

For companies at risk, the consequences are multi-layered. There is the obvious threat of delisting, but there are also knock-on effects: diminished access to institutional capital, reduced analyst coverage, potential defaults under debt covenants tied to exchange listing, and reputational harm that may persist even if compliance is later restored.

Preparing for the shift

While the rules remain in the proposal stage, legal and compliance officers should not wait to act. Companies should evaluate their exposure to the MVPHS threshold, particularly those already contending with bid-price or equity deficiencies. In practice, this means:

• Closely monitoring daily compliance metrics and ensuring accurate internal reporting;
• Engaging with counsel and financial advisors now to develop contingency plans, including potential financing or restructuring measures; and
• Reviewing investor communication strategies to manage market perception in the event of a non-compliance notice.

Companies should also be aware that Nasdaq has also filed a companion proposal to accelerate delisting when a stock closes at $0.10 per share for ten consecutive trading days. This is separate from this MVPHS rule, but reflects Nasdaq’s emphasis on quicker enforcement of compliance issues.

Conclusion

By eliminating key procedural protections, the Nasdaq proposal places more immediate pressure on companies whose market value has fallen below $5 million alongside other deficiencies. For issuers, there will be fewer second chances, and the timeline to respond to compliance challenges will be dramatically shorter. Even while the proposal remains open for comment, companies should prepare as though adoption is imminent. The costs of waiting until the rules are finalized could be significant.